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Should Your CPA or Tax Preparer Have to Follow IRS Rules and Regulations?

written by: •edited by: Donna Cosmato•updated: 6/12/2012

It appears some CPAs in high-up positions think the testing and registration fees are too expensive for some tax professionals, especially those small CPA firms. These higher-ups also think maybe fingerprinting really isn’t all the necessary for CPA firms. Is this for real? You bet.

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    Honesty Is the Best Policy

    Should Accountants Follow the Rules I recently stumbled across an article on Accounting Web suggesting the Internal Revenue Service (IRS) should rethink the fees and regulations on IRS required numbers (PTINs) and fingerprinting for tax professionals. I probably landed on this piece because my personal tax return was due on October 15, and I barely made it. I simply hate tax time, and it’s not because I mind paying. I usually get a refund, but the forms and the headaches and the forms are so time-consuming, I get a headache even thinking about completing my personal return.

    In any event, the Accounting Web article offered, “Patricia A. Thompson, CPA, chair of the American Institute of CPAs (AICPA) Tax Executive Committee, urged the IRS to make changes to the user fee regulations it has proposed for tax return preparers." Ms. Thompson made her urgent appeal in a letter to IRS Commission Douglas H. Shulman on October 7 2011.

    Basically, Thompson feels “user fee regulations" hurt those who must take the IRS competency exam to be qualified to complete a tax return and received the valued Registered Tax Return Preparer’s status. She also feels it’s unfair to require fingerprinting for all tax preparers who want to use the e-file system on behalf of their clients. E-filing means tax preparers are required to apply for and obtain a PTIN or Preparer Tax Identification Number (another fee), however, according to the article, the IRS may stop using PTINs early in 2012 (Note: I couldn’t find anything saying the IRS was discontinuing PTINs but keep reading!)

    Basically, Thompson feels these requirements and regulations and fees could hurt the smaller CPA firms and hence, should be dismissed across the board.

    Wait a minute, Ms. Thompson, shouldn’t there be some accountability (no pun intended) for the accountants who vie for these top jobs of professional tax preparer? I think so!

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    Defusing the Protests

    As the Accounting Web article states, Ms. Thompson has three main concerns. Let’s look at each of them and see if they are indeed good ideas or ones that could make the heads spin behind the H&R Block folks.

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    Staff Fingerprinting

    Fingerprints The first issue is fingerprinting and how “supervised non-signing, non-licensed staff at CPA firms" who never actually take the tax preparer’s test or any type of continuing education should be exempt from fingerprinting rules. Translation: The tax assistants in CPA firms who sit down with you when your tax returns are complete, tell you where to sign, give you a CD with your tax return on it and take your check, cash or credit card should be exempt from fingerprinting.

    Hmm. I guess I have to agree with this one. The firm I have always used and nope, I’m not mentioning their name, has a sweetheart of a gal who does this for me. The only thing I dislike about her is when she tells me how much I owe the accounting firm. She mostly answers the telephone, takes messages, makes copies and scans documents, and I’m sure performs lots of other duties I don’t know about, but she doesn’t “prepare" my tax return.

    We do often laugh, however, because depending whether it’s a business return or a personal return, usually it’s me doing all the picking up, signing and paying, and often, my great hubby isn’t present. She just turns her back while I run outside and sign his name. “I know nothing," she is fond of saying just like Sargent Shultz on the old television show, Hogan’s Heroes.

    I don’t mind and she’s a great asset to the company. What she and I keep between us is fine and dandy and because she didn’t physically prepare my return, crunch the numbers, or sign the return, I don’t think we need to fingerprint this lady—so here I agree with Thompson.

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    PTIN Requirements

    Dewey Cheatem and Howe Preparer Tax Identification Numbers, or PTINs, are how the IRS knows the accounting firm or CPA submitting the return on behalf of their clients is—well, kosher—and has passed necessary exams and got their fingers dirty so to speak during the fingerprinting process. Although the Accounting Web article says the IRS may be stopping PTIN usage “as early as April 19, 2012," I found the opposite information in an article in Accounting Today (Cohn). The writer provided a link to IRS Notice 2011-80, which discusses PTIN renewal and nowhere in the Notice does it say PTINs will cease (see link to Notice in Reference section).

    In any event, Thompson disliked ceasing the use of PTINs and says of the stoppage of PTINs, “The discontinuance of provisional PTINs will result in the need to have supervised employees ‘on the bench’ and unable to prepare returns under CPA supervision for the period of time associated with the processing of the PTIN application and meeting related requirements." Confused? Me too! At first, it appears in the Accounting Web article that PTIN issuing may be stopped, but then Thompson talks about what is contained in Notice 2011-80; there is a process from the time one applies for a PTIN and because it’s a government agency, a lapse in time before the PTIN is received.

    So, what Thompson is saying here (I think) is that perhaps there needs to be a shorter time between applying and obtaining the required PTIN. She urges the delay in obtaining PTINs would mean “...interns, et. (who are) are not supposed to be performing certain services during the pendency of the PTIN application process will negatively impact a CPA firm’s ability to do business."

    Here, I disagree with Thompson. I want tax preparers of all kinds to get a PTIN! If they aren’t forced to, what’s the point of paying them to prepare our tax returns—we can make mistakes on our own right?

    In addition, I think if an accounting firm hires someone new and they are awaiting their PTIN, they should be supervised, much like law firms do when awaiting the passage of the bar on their new hires.

    This is simply the right thing to do all around. We surely don’t want a firm popping up like “Dewey Cheatam and Howe" with no PTIN to show right?

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    CPA Fingerprinting

    Apparently, the IRS wants to start their own fingerprinting process for CPAs, according to Thompson. I guess the fingerprinting process they already go through upon state boards of accountancy are not enough—let’s double dip them, so to speak. But wait a minute folks.

    Ever watch an episode of CSI or NCIS? They always seem to find prints from someone who “was fingerprinted when they got a real estate license" or “was fingerprinted from a state board of accountancy" so aren’t all fingerprints in some accessible big database the IRS can also access?

    Here again, I agree with Thompson—the IRS just wants more money going to their bottom line with fingerprinting fees! If CPAs already must get fingerprinted upon passing their state board exam, why make them get their fingers dirty twice, so to speak.

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    Those Awful Hardship Fees!

    CPAs Can't Afford $100 I think the bottom line on keeping accountants honest does come down to how trustworthy they are and if they follow the rules. While Thompson may not like all the rules (me either) they are there for a reason—regulations.

    I want my CPA and his tax firm to have everything the IRS requires and for Thompson to say some of these things should go bye-bye isn’t a good option for me. The Accounting Web article points out that between fingerprinting, PTIN requirements, and application fees, a tax preparer could pay anywhere between $60 to $90 for the entire process. Wow, really? She is complaining about something that costs less than $100?

    I know in these days of a tough economy, $100 can buy a lot of groceries, but it’s not $1,000 and it’s affordable, even for those smaller CPA firms Ms. Thompson discusses. Actually, if you own a CPA firm or you are a sole-proprietor of a CPA firm and can’t afford $100 or less, I’m not really sure I trust you to be my accountant because you obviously can’t manage your own cash!

    Well, I’ve had my two cents, what’s your opinion? I’d like to hear from some tax preparers such as those who work in accounting firms and CPAs as well. Do you agree or disagree with Thompson? In addition, because you can remain anonymous, tell me the truth, do you allow your staff to pretend a spouse or partner is out in the car and let one person sign for both? Come on, be truthful here!